Presentation to WESTAR May 2014

1. Highlights of Colorado’s New Oil and Gas Hydrocarbon Emission Reduction Rules - Adopted February 2014 Presentation to WESTAR May 2014 Will Allison Colorado Department of Public Health and Environment Highlights of Colorado's Oil and Gas Emission Reduction Rules

2. Rationale for New Rules • Directive from Governor Hickenlooper to find ways to reduce leakage from natural gas production • Responsible development • Reduce waste • Maximize climate change benefits of natural gas usage • Ensure benefits from existing rules for petroleum storage tanks • Proactively address non-compliance with ozone National Ambient Air Quality Standard while also reducing methane emissions which contributes to global climate change Highlights of Colorado's Oil and Gas Emission Reduction Rules

3. 2004 Controls 2006 Controls 2008 Controls Highlights of Colorado's Oil and Gas Emission Reduction Rules

4. Overview of Emission Reduction Strategies • Establishes leak detection and repair requirements for compressor stations and well production facilities • Expands control requirements for storage tanks • Improves capture of emissions at controlled tanks • Expands control requirements for glycol dehydrators • Requires capture or control of the gas stream at well production facilities • Establishes requirements to minimize emissions during well maintenance • Expands pneumatic controller requirements statewide • Requires auto-igniters on all combustion devices Highlights of Colorado's Oil and Gas Emission Reduction Rules

5. Costs and Benefits of New Rules • Estimated annual cost of new rules for industry is approximately $42 million • State will administer rule using existing resources • Significant reduction of volatile organic compounds and methane • Approximately 94,000 tpy of VOC • Approximately 64,000 tpy of methane • Overall cost effectiveness for the entire package is approximately $450 per ton of VOC reduced Highlights of Colorado's Oil and Gas Emission Reduction Rules

6. Well Production Facilities • Requires capture or control of the gas stream at well production facilities from the date of first production • New production facilities (after October 15, 2014) must test for leaks no sooner than 15 days and no later than 30 days after facility commences operation • Existing well production facilities must be inspected within 90 days following the phase-in schedule unless emissions >50 tpy then 30 days • Establishes requirements to minimize emissions during well maintenance Highlights of Colorado's Oil and Gas Emission Reduction Rules

7. Well Production Facilities • Leak Detection and Repair requirements - the plumbing around the gas wells, separators, and ancillary piping is subject to “LDAR” • Establishes comprehensive leak detection program for oil and gas facilities • Frequent monitoring using Method 21 or infra-red (IR) cameras • Tiered monitoring schedule to focus on the highest emitting facilities and reduce the burdens on smaller facilities Highlights of Colorado's Oil and Gas Emission Reduction Rules

8. Storage Tank Controls • All storage tanks statewide - air pollution control requirements reduced from 20 tpy to 6 tpy of VOCs • Includes crude oil and produced water storage tanks • Control device must achieve an average control efficiency of 95% Highlights of Colorado's Oil and Gas Emission Reduction Rules

9. Storage Tank Inspections • Improve capture of emissions at controlled tanks • Controlled tanks must be operated without venting to the atmosphere • Establishes requirements for Storage Tank Emission Management systems (STEM) • Emissions associated with the top of the storage tank (pressure relief valves, thief hatches, control devices/piping) are addressed through STEM • Certified design to minimize emissions • Extensive instrument based and AVO monitoring • Again, a tiered monitoring schedule focuses on the highest emitting facilities and reduces the burdens on smaller facilities Highlights of Colorado's Oil and Gas Emission Reduction Rules

10. Highlights of Colorado's Oil and Gas Emission Reduction Rules

11. Infra-Red Camera Imaging Highlights of Colorado's Oil and Gas Emission Reduction Rules

12. Infra-Red Camera Imaging Leak on loose hammer union on pipe leading to Flare Combustor Highlights of Colorado's Oil and Gas Emission Reduction Rules

13. Repairing Leaks & Recordkeeping • First attempt at repair required within 5 working days with provisions for good cause (parts availability or full shut-down) • Instrument monitoring following the repair(s) are required within 15 working days to determine effectiveness • Operators must maintain records • Initial approved instrument monitoring method • List of leaking components and monitoring method used to determine the leak • Date of first repair attempt and if necessary additional attempts, and many other records Highlights of Colorado's Oil and Gas Emission Reduction Rules

14. Glycol Dehydrators • Glycol Dehydrators - air pollution control requirements reduced from 15 tpy to 6 tpy of VOCs • 2 tpy requirement for Dehydrators located within 1320’ of building unit or designated outside activity • Control device must achieve an average control efficiency of 95% Highlights of Colorado's Oil and Gas Emission Reduction Rules

15. Natural Gas Compressor Stations • Existing natural gas compressor stations must be inspected within 90 days after January 1, 2015 for leaks unless emissions >50 tpy then 30 days. • Ongoing LDAR inspections depends on the emissions from the facility Highlights of Colorado's Oil and Gas Emission Reduction Rules

16. Natural Gas Pneumatic Controllers • After May 1, 2014 must reduce VOCs emitted equal to or less than a low bleed pneumatic controller • No-bleed controllers where onsite electrical power is used • Existing high-bleed controllers must be replaced or retrofitted by May 1, 2015 Highlights of Colorado's Oil and Gas Emission Reduction Rules

17. Summary of Key Points • Expands Colorado’s existing program and establishes innovative new strategies that address each of the most significant sources of hydrocarbon emissions from the oil and gas production sector • Maintains Colorado’s leadership role in regulating air emissions from oil and gas production • Establishes a rigorous set of requirements to ensure responsible development of Colorado’s oil and gas resources Highlights of Colorado's Oil and Gas Emission Reduction Rules